The Agreement between Israel and the Palestinian Authority on Electricity:
Guiding Rationales for a Working Model
INSS Insight No. 857, September 22, 2016
Kobi Michael
http://www.inss.org.il/index.aspx?id=4538&articleid=12370

SUMMARY: In September 2016, an agreement was signed between Israel and the
Palestinian Authority to regulate Palestinian debt payment to the Israel
Electric Corporation. This agreement is important for its institutionalizing
patterns of cooperation between the Israeli government and the PA during a
period when the political process is completely frozen. It demonstrates the
potential for cooperation between Israel and the PA, and the ability of
professionals from both sides to advance significant collaborations, even
while the peace process is frozen. This is a flicker of optimism that must
be developed in the process of building the Palestinian state and governing
institutions and strengthening the Palestinian economy from the bottom up.

In September 2016, an agreement was signed between the Israeli Ministry of
Finance, the Coordinator of Government Activities in the Territories
(COGAT), and the Palestinian Authority (via the Minister of Civil Affairs),
to regulate Palestinian debt payment to the Israel Electric Corporation.
Terms of the agreement included the cancellation of a debt of half a billion
shekels and regulation of the PA’s responsibility to collect debts and
payments for electricity provided by the Israel Electric Corporation, as
well as its responsibility to maintain and develop the Palestinian
electricity network in the West Bank. This agreement is the first of its
kind and scope in many years. It is also important for its
institutionalizing patterns of cooperation between the Israeli government
and the PA during a period when the political process is completely frozen.

The electricity agreement has four guiding rationales that are important in
general, and specifically at this time, on the political, security,
economic, and humanitarian levels:
a. Political rationale: Transferring responsibility for payment
collection for electricity provided to Palestinian consumers and for
maintenance and development of the Palestinian electricity network will make
the PA, for the first time since its establishment, a governmental authority
responsible for a very important resource and infrastructure. This
responsibility will require the PA to operate collection and enforcement
mechanisms, which could serve it in additional areas in the future, and to
allocate resources to infrastructure planning on the national level. These
responsibilities may help raise the PA’s governing capabilities to a higher
performance level, which would undoubtedly have an impact on its stability.
It might likewise increase Israel’s flexibility regarding similar agreements
in different areas of infrastructure and in transferring more extensive
authority to the PA, with the knowledge that there is a responsible and
functional party on the Palestinian side.

b. Security rationale: Electricity is an existential resource, required
for daily life and proper and regular operation of national infrastructure
and critical facilities. Irregular supply or lack of electricity interrupts
daily life, and in the Palestinian case, may even lead to unrest and
disturbances. Protests could be directed at the Palestinian Authority,
mayors, or heads of local councils (as happened in Nablus recently), and
escalate into riots that could spiral out of control, become inflamed, and
then diverted toward Israel. Violent clashes between Palestinian citizens
and the Israeli security forces would constitute a security problem. The
agreement decreases the chances of scenarios of this kind being realized.

c. Economic rationale: The electricity agreement is intended to decrease
the massive debt of Palestinian consumers to the Israel Electric
Corporation. The debt has grown over the years and reached a sum of some two
billion NIS, significantly burdening the Israel Electric Corporation.
Without an agreement, the Israel Electric Corporation would not have been
able to recover the debt, unless the Israeli government had subtracted some
or all of the debt from the taxes which it collects for the PA. Such use of
taxes could have far reaching consequences, both politically – resulting in
international criticism of Israel – and economically, with a negative impact
on the PA’s stability and ability to function. Although the agreement signed
includes very substantial debt cancellation - some 500 million NIS – it also
ensures repayment of the remainder to the Israel Electric Corporation.

d. Humanitarian rationale: The electricity agreement prevents a
humanitarian crisis that could have resulted from private and institutional
consumers in the PA being disconnected from the electricity supply (as has
occurred several times in the past) and ensures a regular electricity supply
to consumers, and even future improvement in the Palestinian electricity
network infrastructure, in a manner that will enable economic and
infrastructure development and meet the needs of the growing population.

The agreement also offsets problematic political statements about the PA and
its leader, which maintain that they are the ones blocking political
progress. The agreement demonstrates the potential for cooperation between
Israel and the PA, and the ability of professionals from both sides to
advance significant collaborations, even while the peace process is frozen.
This is a flicker of optimism that must be leveraged and developed as a
basis for a process of building the Palestinian state and governing
institutions and strengthening the Palestinian economy from the bottom up.
Capabilities must be developed that in the future could be translated into
establishing a functional and sustainable Palestinian state. The agreement
proves that cooperation between the sides is possible and that the frozen
political process – as burdensome and problematic as it is – does not need
to stop what can and must be done immediately for the welfare of the
residents of the West Bank.

In addition, the agreement could serve as a model for similar agreements
regarding other types of infrastructure, such as water, the environment,
transportation, health, and more, and assist in improving Palestinian
governance, as well as the welfare and quality of life of the Palestinian
population. Additional agreements of this kind could provide an expanded
basis for cooperation between the sides, build trust, decrease the potential
for escalation, and create better conditions for renewing the peace process.
Therefore, the Israeli government would do well to apply the overall
rationale of the electricity agreement in additional fields, in a manner
that would expand the responsibilities of the PA for the daily life of its
citizens and allow it to use existing resources – including the
international aid it receives – in a way that improves the critical
infrastructure of a functioning Palestinian state the day after its
establishment.